Kids and Money

Introducing kids to money sensibly and responsibly I think is an important part of any family’s DNA. Natural instinct is for kids to have anything they want and to shower them with gifts and presents, however it is also important they don’t become spoiled.

An important thing to consider once you have FIRE’d is that it isn’t seen as selfish. Our children have asked us several times if we are “poor now” because we aren’t working. They are old enough to understand that we have lived our life different to many others, we made a lot of sacrifices in our working life which has enabled us to live how we do now. For them life should look no different. Sure, they might not eat out as much as they used to, and we might not have as many fancy vacations, but their day to day life looks much the same. Hopefully it is better as we are there for them every day and we can attend many more school functions.

The other thing to consider with kids is the subject of their own money. When I was a kid I would get a small amount of pocket money enough to get some sweets or to save up for a few weeks for a new book or computer game. Our policy is that our children receive a weekly allowance equal to 50c per year of age. Hence our 10 year old gets $5 a week. He doesn’t really get the concept of saving, once that cash is in his hand it’s off to the store for to purchase something. He has the collector gene (like his dad!) so he likes to spend his money on Hot Wheels cars or Magic cards. It’s hard at his age to introduce him to savings and compounding, but we have started making inroads. He has some toys he has out grown that we have sold off and he has the money saved for when he is older.

There is a certain expectation that some chores will be done to receive this money. They aren’t overly onerous and are typical things like emptying the dishwasher and putting out the trash.

For our daughter, when she was 13 we gave her the option of keeping with the 50c a year plan or moving to a dollar a year but she has to purchase her own clothes and personal supplies (make up, hair product etc.) We also opened a bank account for her so that she can start to save effectively. This seems to work successfully as when she is out with friends now she has to make her own decision on whether to buy a new top or not. When he is 13 we will make the same offer to our son.

The most important support we can give our kids is to allow them to follow their dreams and to give them the resources they need to achieve them. Part of that is their 529 plan which should allow them to attend any university they want. We are also teaching them them the importance of saving and investing.

So how much money do you think is right to give kids? When is the right time to introduce them to investing?